For the fiscal year ended December 31, 2010, the Net Assets per unit of the Fund was $11.88 after payment of distributions to securityholders compared to $11.80 on December 31, 2009. The Fund paid cash distributions of $0.91 per unit during the year. The Fund had a total return of 8.4% compared to the S&P/TSX Preferred Share Index which returned 2.0%.

Huh? 2.0%?

It appears they are using the Price Index, not the total return index. The total return on the S&P/TSX Preferred Share Index was 7.73% in 2010. Price Index, Schmice Index. The long term expected return on the price index for any fixed income category is a big fat (all together now, folks! 3, 2, 1…) ZERO.

Right away I’ve lost all sympathy and most of my interest in these guys. Let’s just say that comparing fund total return to benchmark price return, particularly in the fixed income sector, is not quite strictly a practice I recommend, and leave it at that, OK? But I’ll soldier on and look at the “Audited annual financial statements – English”, also filed 2011-3-31.

At year-end 2010, they had $21.8-million in margin debt and $56.2-million in equity, for a leverage factor of 1.39:1, while at year end 2009, the figures were $14.3-million, $69.6-million, 1.21:1. So they were levered up big-time during a bull market and were only just able to beat their benchmark after fees.

Ah yes, fees.

TheManager is entitled to an annual fee of 2.10% based on the Net Asset Value of the Fund. This fee is calculated daily and payable monthly in arrears. The Manager is responsible for fees payable to the Portfolio Manager.

In addition, the Manager is entitled to an amount equal to the service fee payable to dealers, which is equal to 0.40% annually of the Net Asset Value of the Fund held by clients of the sales representatives of dealers. This fee is calculated daily and paid quarterly in arrears.

The Fund is responsible for all costs relating to its administration.

The total MER is reported in the Fund Performance hand-out. 3.33%. Nice work if you can get it!

The portfolio at year end was:

CAD Preferreds 73.49% (no breakdown by type)

USD Preferreds 3.71%

CAD ‘bonds, notes and convertibles’ 19.58%

USD ‘bonds, notes and convertibles’ 3.08%

Gain on USD to CAD forwards 0.14%

Sadly, I have no more interest in the fund now than I had this morning.